Em­ploy­ment Pre­served as Over­ca­pac­ity Is Shed

China Today (English) - - CON­TENTS - By staff reporter JIAO FENG

The coun­try has for­mu­lated a pol­icy port­fo­lio to ad­dress the over­ca­pac­ity dis­solve and the re­al­lo­ca­tion of laid-off work­ers.

EX­CESS ca­pac­ity of its man­u­fac­tur­ing in­dus­try is cur­rently the most urgent eco­nomic prob­lem China needs to deal with. The is­sue is es­pe­cially se­ri­ous in the iron, steel, coal, ce­ment, and plate glass in­dus­tries where en­ter­prises are strug­gling. These in­dus­tries ex­haust re­sources, mak­ing it im­pos­si­ble for China to rely on emerg­ing in­dus­tries, which rep­re­sent the fu­ture of China’s econ­omy. What’s more, credit risks such as over­due loans and over­due cor­po­rate debts haunt these in- dus­tries, and may spill into other ar­eas. There­fore, China’s top eco­nomic pri­or­ity this year is to dis­solve ex­cess ca­pac­ity.

The Cen­tral Eco­nomic Work Con­fer­ence con­vened at the end of 2015 pro­posed that a com­pre­hen­sive sup­port­ing pol­icy sys­tem be for­mu­lated to fa­cil­i­tate bank­ruptcy pro­ce­dures based on market rules, and ac­cel­er­ate in­sol­vency liq­ui­da­tion, so en­abling low added-value and en­ergy in­ten­sive com­pa­nies to exit the market sooner. Dur­ing this process, con­cerned en­ter­prises should play the prin­ci­pal role, gov­ern­ments pro­vide the im­pe­tus and in­cen­tive, and all mea­sures should be market-based and law-abid­ing.

One vi­tal and dif­fi­cult as­pect of cut­ting over­ca­pac­ity is the re­al­lo­ca­tion of laid- off work­ers. Sta­tis­tics show that most of the in­dus­tries with ex­cess ca­pac­ity are labor in­ten­sive. As many as 1.8 mil­lion em­ploy­ees need to be out­placed in the iron and steel in­dus­try alone. The over­all num­ber is es­ti­mated to be 10 mil­lion. This is quite a challenge for the Chi­nese govern­ment.

Ac­cord­ing to the Min­istry of Hu­man Re­sources and So­cial Se­cu­rity, there are mainly four ways of re­al­lo­ca­tion: trans­fer­ring to dif­fer­ent po­si­tions within the

en­ter­prise, of­fer­ing new jobs in other com­pa­nies, early re­tire­ment for se­nior work­ers, and ar­rang­ing pub­lic ser­vice jobs. This year, RMB 100 bil­lion will be al­lo­cated by cen­tral fi­nance to help re­solve this is­sue.

More In­put to Help Job Transfers

Si­nos­teel Xing­tai Ma­chin­ery & Mill Roll Co., Ltd. ( Si­nos­teel XMMC), es­tab­lished in 1958, mainly pro­duces mill rolls and met­al­lur­gi­cal equip­ment. Its out­put and sales of rolls ranked first in the world in 2007. How­ever, in 2012, Si­nos­teel XMMC was listed by the mu­nic­i­pal govern­ment of Xing­tai, He­bei Province, as one of the most air pol­lut­ing com­pa­nies, and that needed ma­jor treat­ment.

With enhanced fi­nan­cial in­put, the com­pany up­graded its en­vi­ron­men­tal pro­tect­ing fa­cil­i­ties, over­hauled its prod­uct lines and halted cer­tain op­er­a­tions. As a re­sult, emis­sions of var­i­ous pol­lu­tants were ef­fec­tively re­duced. But, at the same time, op­er­a­tion costs rose. In tack­ling pol­lu­tion and read­just­ing its in­dus­trial struc­ture, Si­nos­teel XMMC re­trained as many as 2,000 em­ploy­ees for new jobs and skills. “Af­fected by the slug­gish in­ter­na­tional iron and steel market, de­mand for some prod­ucts is shrink­ing sharply. Or­ders are pal­try, prices are fall­ing. En­ter­prises are fac­ing the dual pres­sure of en­vi­ron­men­tal pro­tec­tion and a slug­gish market,” a man­ager told the reporter.

Zhang Yushan is a mem­ber of the se­cu­rity staff of a sub­sidiary of Si­nos­teel XMMC. He used to work in the pack­ag­ing sec­tion for an in­come of nearly RMB 3,000 per month. It was enough for his fam­ily to make ends meet. But af­ter the in­dus­trial re­struc­tur­ing, out­put dropped sharply – so did his in­come. The re­duced salary of RMB 1,200 was not enough for him to sup­port his fam­ily. Dis­tressed and worried about the eco­nomic cri­sis his fam­ily was fac­ing, Zhang Yushan de­cided to quit the post, and re­trained to be­come a se­cu­rity of­fi­cer. This new po­si­tion se­cured him a higher and more sta­ble in­come than be­fore.

In 2014, He­bei Province put for­ward new poli­cies to help en­ter­prises re­tain jobs, stip­u­lat­ing that the un­em­ploy­ment in­sur­ance fund should fi­nance qual­i­fied com­pa­nies to con­duct re­train­ing, sub­si­dize cer­tain po­si­tions, and com­ple­ment so­cial se­cu­rity. The goal is to en­cour­age em­ploy­ers to re­al­lo­cate work­ers and re­duce layoffs as much as pos­si­ble. For com­pa­nies where the av­er­age in­come is below 60 per­cent of the re­gional fig­ure, the com­pa­nies and their work­ers are al­lowed to pay their re­spec­tive share of con­tri­bu­tions to a so­cial se­cu­rity fund ac­cord­ing to their ac­tual in­come, so eas­ing their fi­nan­cial bur­dens. Si­nos­teel XMMC re­ceived a RMB 7.7 mil­lion sub­sidy thanks to these sup­port­ive poli­cies. Since 2014, Xing­tai City has al­to­gether of­fered 34 com­pa­nies RMB 58.52 mil­lion in such sub­si­dies, bring­ing real ben­e­fits to over 50,000 em­ploy­ees.

As long as we seize the op­por­tu­ni­ties, and make break­throughs in trans­for­ma­tion, up­grad­ing, and in­no­va­tion, we will ab­so­lutely re­al­ize new de­vel­op­ment.

In­ner Diges­tion within Com­pa­nies

Cut­ting over­ca­pac­ity is a truly tough challenge but will rev­o­lu­tion­ize in­dus­try. Sta­tis­tics show that a re­duc­tion of 10 mil­lion tons of ca­pac­ity in the iron and steel in­dus­try will re­duce govern­ment rev­enue by RMB 1.42 bil­lion.

To re­al­ize in­dus­trial trans­for­ma­tion, up­grad­ing, and green de­vel­op­ment, He­bei Xing­tai Cable Co., Ltd. has set a good ex­am­ple. In 2014, Xing­tai Cable moved from down­town Xing­tai to a subur­ban in­dus­trial park. Two boil­ers were dis­man­tled, each with a pro­duc­tion ca­pac­ity of 10 tons, and many pro­duc­tion lines of wires and ca­bles were shut down. All this was ac­com­plished with­out any govern­ment com­pen­sa­tion.

“We were fac­ing ex­treme dif­fi­cul­ties. Work­ers could only earn min­i­mum wages,” Hu Jianzeng, hu­man re­sources man­ager of Xing­tai Cable, re­called. How­ever, with­out lay­ing off one sin­gle em­ployee, the com­pany con­cen­trated its fi­nances to op­ti­mize and up­grade its op­er­a­tion. High en­ergy-con­sum­ing pro­ce­dures were elim­i­nated, low ef­fi­ciency pro­cesses were phased out, and new technologies were adopted. Mean­while, to meet market de­mands, Xing­tai Cable de­vel­oped a bunch of pop­u­lar, en­vi­ron­men­tally friendly prod­ucts, hugely en­hanc­ing its com­pet­i­tive­ness. Hu Jianzeng said, “Cut­ting ex­cess ca­pac­ity did bring about some tem­po­rary ob­sta­cles. But these chal­lenges are at the same time op­por­tu­ni­ties. As long as we seize the op­por­tu­ni­ties, and make break­throughs in trans­for­ma­tion, up­grad­ing, and in­no­va­tion, we will ab­so­lutely re­al­ize new de­vel­op­ment.”

Duan Fuqing, his fa­ther, and his wife all work for Xing­tai Cable. When pro­duc­tion was halted and the com­pany was be­ing re­lo­cated in 2014, he was earn­ing a mere RMB 1,000 each month. Af­ter the re­lo­ca­tion, in or­der to meet the de­mand of new pro­duc­tion tech­niques, the 50-year-old was re­trained with some of the younger em­ploy­ees. Now, he is a su­per­vi­sor in one of the work­shops at the new fac­tory and his monthly in­come has risen to over RMB 3,000. “I never imag­ined that at this age I could be pro­moted.” He was quite op­ti­mistic about this change.

In Au­gust, 2015, Xing­tai took the lead in He­bei Province to con­duct re­train­ing in some spe­cial fields, pro­mot­ing the tech­niques and skills of laid-off work­ers to make sure that they could be re­al­lo­cated to new po­si­tions within their en­ter­prises.

Ac­cord­ing to rel­e­vant He­bei Province reg­u­la­tions, en­ter­prises that pro­vide jobs for those made re­dun­dant due to over­ca­pac­ity cuts will re­ceive a govern­ment sub­sidy of RMB 1,000 for each job they of­fer; for en­ter­prises who re­cruit those strug­gling to find em­ploy­ment, taxes and fees will be ex­empted or de­ducted, an in­ter­est sub­sidy will be of­fered for mi­cro loans, and a so­cial se­cu­rity sub­sidy and job sub­sidy will be pro­vided for a min­i­mum of three years. These in­cen­tives are all in place to en­cour­age com­pa­nies to ease the em­ploy­ment pres­sure of cut­ting over­ca­pac­ity. Al­to­gether He­bei has granted RMB 16 mil­lion in so­cial in­sur­ance sub­si­dies for work­ers and RMB 532,000 for el­i­gi­ble en­ter­prises in this re­gard.

Xu Guixia works for the blast fur­nace di­vi­sion of Xing­tai Iron & Steel Corp., Ltd. Since the ca­pac­ity cut­ting cam­paign be­gan, two blast fur­naces have been shut down, one where Xu Guixia worked. She re­called her feel­ings back then: “I was 38 years old. I had been work­ing there since grad­u­a­tion. But all of a sud­den, I had no job. Where should I go? I felt very worried and in­se­cure.”

Xu Guixia was one of the 300 work­ers in the com­pany who needed to be re­al­lo­cated. The work­ers’ union ar­ranged spe­cial­ized re­train­ing for them. Af­ter six months, Xu Guixia was study­ing at a raw ma­te­ri­als work­shop. Thanks to her dili­gence, she se­cured a sta­tis­tics po­si­tion amid quite fierce competition. She said hap­pily, “My in­come now is RMB 1,000 higher than be­fore the re­train­ing. I’m very sat­is­fied.”

Re­al­lo­ca­tion Pres­sure Grow­ing

He­bei is im­ple­ment­ing the “6643 Project,” which means that from 2014 to 2017 the pro­duc­tion ca­pac­ity of iron and steel will be re­duced by 60 mil­lion tons, ce­ment by 61 mil­lion tons, stan­dard coal by 40 mil­lion tons, and glass by 36 mil­lion weight cases.

It is es­ti­mated that by the end of 2017, in­dus­trial re­struc­tur­ing in He­bei will in­volve as many as 7,071 com­pa­nies, 1,888 of which are con­cen­trated in the iron and steel in­dus­try, 966 from the build­ing ma­te­ri­als in­dus­try (ce­ment and glass), and 955 are coal- fu­eled boiler com­pa­nies. By the end of 2017, 1.06 mil­lion work­ers will be af­fected: 700,000 are in­sured and the re­main­ing 358,000 are mi­grant work­ers or tem­po­rary ones. Of them about 415,000 could be re­al­lo­cated through re­train­ing and po­si­tion trans­fer, 214,000 could be helped by the un­em­ploy­ment in­sur­ance fund through its sub­si­dies to their em­ploy­ers, 123,200 may see their labor contract ter­mi­nated, and about 310,000 mi­grant work­ers will need new jobs.

By the end of 2015, the ar­range­ment of 116,700 work­ers in He­bei was still un­de­cided. Gov­ern­ments at var­i­ous lev­els do not al­low com­pa­nies to lay off large amount of work­ers, so the com­pa­nies are re­sort­ing to tem­po­rary ar­range­ments, such as in­ter­nal train­ing, work shifts, pro­vid­ing un­em­ploy­ment sub­si­dies, and of­fer­ing tem­po­rary sup­port­ive jobs. As time goes on and cor­po­rate fi­nan­cial pres­sure in­creases, the em­ploy­ment sit­u­a­tion in the province will undoubtedly worsen.

The blast fur­naces of two iron and steel com­pa­nies in Xuan­hua District, Zhangji­akou City of He­bei Province are dis­man­teled in Fe­bru­ary 2014.

Si­nos­teel XMMC is a lead­ing pro­ducer of mill rolls.

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